US Treasury softens criticism on China’s currency policy

The US Treasury Department has softened its stance on China’s currency policy following Beijing’s recent moves to allow market forces a greater role in setting the renminbi’s value.

In a semiannual currency report released Monday, the department dropped a previous wording that the renminbi is “significantly undervalued” and merely said the currency is “below its appropriate medium-term valuation”, the Wall Street Journal reported.

The shift in Washington’s tone comes after Beijing in August adjusted its currency policy to let the renminbi move more easily with the market.

The International Monetary Fund has commended China’s recent moves, but the US Treasury said Monday that it will watch Beijing’s next steps closely.

“Treasury is carefully monitoring the implementation of the new exchange-rate policy approach and how it will work in practice—specifically, whether China will allow the renminbi to respond to market forces for appreciation as well as for depreciation,” the department said in its report.

Besides China’s policy steps, the Treasury pointed to the uncertain outlook for the global economy, and the related volatility in markets, as a new, more complicated backdrop against which to judge the yuan, the Journal noted.

“The near-term trajectory of the renminbi is difficult to assess,” the Treasury said in the report. “However, our judgment is that the renminbi remains below its appropriate medium-term valuation.”

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